Lucent CEO Russo seen as strong manager, morale builder
By Linda A. Johnson, Associated Press, 6/8/2002 12:01
MURRAY HILL, N.J. (AP) Patricia Russo is considered so competitive that colleagues have asked her to skip sports on their executive retreats.
''They actually asked her to stop playing golf and tennis because she would win every time. She'll kill you,'' said Fred Lane, a former AT&T manager who has known Russo for 15 years.
That drive should serve Russo well as Lucent Technologies' new chief executive, where she is trying to complete a complex turnaround engineered by predecessor Henry Schacht. Amid a severe decline in the $200 billion telecom equipment market, Russo is trying to restore confidence among Lucent's drastically smaller work force and its biggest customers, the huge communications service providers.
''My focus is that we both survive and thrive, and they are sequential,'' Russo, 49, said during a recent interview in her tidy, glass-walled office in Murray Hill. ''It's my intent that, as we come through this industry downturn, we emerge stronger, leaner, more competitive and a more customer-focused company than we've ever been.''
Russo, a 20-year veteran of AT&T and then Lucent and Eastman Kodak, took over as Lucent's CEO on Jan. 7, just 14 months into a restructuring that has seen the company's work force slashed from about 120,000 to 56,000. The reductions have been accomplished through retirement buyouts, asset sales, spinoffs and some 20,000 layoffs, but Lucent isn't done yet 6,000 more job cuts are planned.
The company's fall includes more staggering numbers:
Its stock price crashed from $84 a share in December 1999 to $3 this spring.
Quarterly results plunged from billion-dollar profits to an $8.8 billion net loss last summer.
Starting in 2000, the company repeatedly missed earnings targets; that fall, it had to reduce previously reported revenues by $125 million for sales booked prematurely.
A key problem was that from 1999 through early 2001, Lucent focused on one technology for increasing capacity of fiber-optic communications networks, while rival Nortel Networks pushed another that proved far more popular. Meanwhile, both companies financed big equipment purchases by Internet service providers and startups that collapsed without repaying the loans.
Lucent's board of directors finally ousted CEO Richard McGinn in October 2000 and temporarily brought back Schacht, who had led the company during its first year after being spun off from AT&T.
Schacht said Russo ''fit the bill perfectly'' as his replacement because she knew Lucent's business well, had previously turned around AT&T's troubled Business Communications Systems division and then strengthened her leadership skills as president of Kodak in 2001.
''She hit the ground without any break in stride,'' Schacht said. ''It's early days, but so far, so good.''
In her first quarter as CEO, Lucent cut its loss to about $400 million from $3.7 billion a year earlier, sharply improved its gross margin, returned to positive cash flow and increased revenues slightly while competitors' sales were falling.
Russo continues to drive down costs, aiming to reach break-even by fall, is expanding Lucent's small board of directors and has brought in a new chief information officer and senior vice president of global sales.
Lucent still needs more outside blood, according to telecom equipment analyst Steve Levy of Lehman Brothers, who called the company's stock ''toxic waste'' back in 1999 when other analysts were still bullish on it. But he's recommending the stock again and says Russo is a really strong manager whose executives ''will walk through walls for her.''
''My concern about Pat is whether she has the outside world perspective and creativity to grow the company,'' Levy said.
Current and former colleagues and industry analysts say Russo is a consensus builder who inspires loyalty from managers and rank-and-file workers.
Joe McCabe, a colleague at AT&T, describes her as decisive but approachable, taking time to get input from colleagues and low-level managers before moving.
''Pat is very good at building what I'll call executive teams, not just managing a group of all-stars,'' McCabe said.
When she became president of the struggling business phone systems unit in 1995, she had to lay off thousands of workers to restore profitability, McCabe recalls. By year's end, the unit was back on track.
By keeping the staff informed about what to expect, McCabe said, she prevented a ''victim mentality'' from developing.
''She'll tell it like it is,'' he said. ''That builds loyalty and that builds morale.''
A Trenton, N.J., native, Russo was the second oldest of seven children. Ever athletic, she played soccer and tennis with neighborhood boys and took up golf at 12. In high school, she was co-captain of the girls basketball team, captain of the cheerleading team and played soccer and golf.
After graduating in 1969, she earned a bachelor's degree in political science and history at Georgetown University, then went to work as a sales representative for IBM.
''I just focused on doing the best job at what I was doing and the next opportunity would come along,'' she said.
Russo spent eight years at IBM in sales and marketing before leaving in 1981 for AT&T. She worked in middle management and then executive positions at AT&T and was one of the founding executives when Lucent was spun off in 1996.
She soon became corporate operations vice president, overseeing several departments and planning company strategy. From 1999 to 2000, she was chief executive of Lucent's core business, its Service Provider Networks Group.
Lucent had been growing exponentially, gobbling up smaller companies and diversifying. But in summer 2000, then-CEO McGinn decided to restructure the company, personally overseeing the service provider business as the company prepared to spin off its other divisions. That left him and Russo basically doing the same job, a situation Lucent's board decided wouldn't work, Schacht recalled.
Russo left shortly before the company started unraveling in fall 2000. By April 2001, she was president and chief operating officer at Kodak in Rochester, N.Y. But nine months later, Russo was back at Lucent.
''This is a job that I feel like I've been preparing for all my life,'' she said at the time.
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